Czech Billionaire To Buy British Royal Mail

For £3.57 billion.

Czech billionaire Daniel Křetínský (Forbes estimates his fortune at $9.3 billion) may become the first foreigner in history to take control of the British postal service Royal Mail, founded in the 16th century. On Wednesday, May 29, the parent company of the postal operator International Distribution Services (IDS) announced that its board of directors supported the repeated offer of one of the entities controlled by Křetínský's EP Group (EP UK Bidco Limited) to buy out all IDS shares. In addition to those that EP Group already controls through its other structure — Vesa Equity Investment (Vesa), which owns approximately 27.6% of IDS shares and is its largest shareholder.

Under the terms of the agreement, EP Group agreed to pay up to £3.7 per IDS share, of which £0.08 could be paid to the UK company's current shareholders if the deal is approved. Křetínský's proposed price is 73% higher than the price of IDS securities on April 16, 2014 (the last trading day on the London Stock Exchange before the purchase offer was made) and more than one and a half times the weighted average price for the previous 12 months.

The total value of the transaction is thus estimated at £3.568 billion ($4.55 billion). After the announcement of the decision of the board of directors of IDS, the price of its securities on the London Stock Exchange increased by 4%, rising to a maximum of £3,352.

“Royal Mail is part of the very fabric of British society and has remained so for hundreds of years. EP Group has the deepest respect for the history and traditions of Royal Mail, and I know that owning this business comes with a huge responsibility not only to the company's employees, but also to the citizens of the country who rely on its services every day,” said Krzetinski.

The billionaire assured that EP Group is ready to support IDS at the “critical stage of its transformation”, which the company needs in order to keep up with competitors and become one of the largest postal logistics groups in Europe.

Under the terms of the agreement reached, EP Group undertook, for five years after the transaction, to comply with the postal delivery rules currently in force in Britain and maintain the Royal Mail brand, not to move the headquarters of IDS and Royal Mail Group outside the country, and to leave both companies as tax residents of the UK and for two years not to worsen the working conditions of workers.

IDS's board of directors in its announcement called the terms of the company's acquisition “fair and reasonable”. The directors pointed out that Royal Mail was experiencing financial difficulties due to a years-long decline in the number of letters sent and the scale of losses was such that it was preventing urgently needed modernization, and becoming a private company under the management of the EP Group would allow the postal operator to attract for its development investments and “focus on long-term growth, free from short-term financial goals and the dividend pressures of public markets.”

The directors of IDS unanimously recommended that the company's shareholders accept the transaction proposed by EP Group. The final decision on its adoption must be made at a meeting of IDS shareholders. However, one of the current co-owners of the company told the Financial Times that he was disappointed with the proposed amount and feared that the failure of the deal would lead to IDS shareholders being “stuck” in a worse situation associated with the company’s top managers who see no benefit in keeping its public status.